President Uhuru Kenyatta’s pet project of constructing at least 500,000 affordable houses per year faces a bleak future after the National Treasury said there is no money.
President Kenyatta had outlined four key development priorities under the Big Four Agenda over a five-year period.
The Government planned to offer decent, but affordable houses to Kenyans under the Affordable Housing Scheme.
The Jubilee administration had set a target of building half-a-million units in major cities around the country.It is, however, yet to take shape with just two years left under the Uhuru presidency.
To date, the Government has completed 228 units of the 1,370 units it is building in Ngara, Nairobi. While the Transport and Housing Ministry has in the past said the bulk of houses will be built by private sector investors, the few units that the Government has completed are barely enough to make a mark and are way off target.
No more funds
Transport, Housing and Urban Development Cabinet Secretary James Macharia told the National Assembly’s Transport Committee that they needed at least Sh45.2 billion from the Treasury for the project to take off.
But Treasury says there is no money.Macharia said out of the Sh45.2 billion requested, the Treasury only allocated Sh5 billion in the current financial year with only Sh1 billion disbursed so far.
“If the requested budget was availed then we would be having 130,000 units underway. We requested Sh45.2 billion, but only Sh5 billion was allocated in the current financial year,” said Macharia.
National Treasury Cabinet Secretary Ukur Yatani said although they had budgeted for Sh45.2 billion and allocated Sh5 billion in the current financial year, the country’s revenue has not increased.
Even going forward, he said the Government may not be in a position to allocate more funds to the project.
“We had budgeted funds for the take-off of the project, but we are unable to release funds because there is no money,” Yatani told the MPs.
Yatani was responding to MPs who had sought to know why despite his ministry’s assurance last year that they will pump in more money to the project, nothing had taken off.
“When you appeared before us here last year, your ministry gave us an assurance that you will pump funds into the Housing Fund for the take-off of the Affordable Housing Project (AHP). Where is this Sh45 billion?” questioned Transport Committee Chairman David Pkosing (Pokot South).
But Yatani revealed they have received an exchequer request to avail the Sh4 billion that has not been disbursed in the current financial year.
According to Macharia, the take-off of the project had set backs because of the delays in the implementation of mandatory contribution and lack of support from the public.
In 2018, the employers’ lobby, Federation of Kenya Employers had sued the government over the Finance Act 2018, which was compelling workers to contribute 1.5 per cent of their basic salary to the fund, with a similar amount matched by employers.
Private sector contributors were to use their savings as deposit or security when negotiating for mortgages to buy the affordable houses, while low-income buyers were to rely on the contributions to negotiate tenant purchase schemes that would eventually leave them as owners.
But now the ministry has revised the approach with a reliance on voluntary contribution.
Macharia told the MPs that in order to have more housing units to the middle class, they have engaged the Kenya Mortgage Refinance Company (KMRC) to address the inherent financing challenges and unlock liquidity for affordable housing .
KMRC was established as a public private partnership arrangement with majority private sector owned in order to crowd in private sector funding to support affordable housing.
Housing Principal Secretary Charles Hinga who accompanied Macharia explained that through its re-financing activities, KMRC will seek to catalyze the growth of the mortgage market in Kenya by targeting households that fall within the mortgage gap and lower-middle-income categories which represents about 95 per cent of the formally employed population.
“Kenyans will access longer term housing loans and enjoy a wide choice of competitively priced mortgage offered in the market due to increased competition and product innovation amongst primary mortgage Lenders.
This will lead to an increase in homeownership and growth in household assets,” said Hinga.“It is envisioned that in the medium term, KMRC will contribute to lowering of overall transaction costs by pooling issuance of bonds as compared to financial institutions accessing the market individually and spur development of the mortgage market.”
He said KMRC will be a regular issuer of long-term, high quality investments needed by institutions with long term liabilities thus crowding in pension funds, social security funds and insurance companies.
In addition, two development finance institutions, Shelter Afrique and International Finance Corporation (IFC), are keen to invest equity in KMRC and are currently finalizing their due diligence processes.